Positive outlook on trade talks between the US and India: RBI Governor
Reserve Bank of India (RBI) Governor, Sanjay Malhotra, said Monday that he was hopeful the ongoing trade talks between the US and India will end well.
At an event held here, the governor of the central bank stated, “We are hopeful that negotiations on tariffs will play out and there will be minimal impact.”
Malhotra’s remarks coincide with the postponement of the sixth session of the Bilateral Trade Agreement (BTA) talks between the United States and India, which were initially scheduled for August 25.
Additionally, the governor stated that India’s substantial foreign exchange reserves serve as a solid cushion against external shocks and are adequate to fund 11 months’ worth of imports.
“With $695 billion in foreign exchange reserves, we have enough money to fund 11 months’ worth of merchandise exports. We must now strive for a “Samriddh Bharat,” or affluent India, after generations of independence fighters gave us a “Swatantra Bharat,” or free India,” Malhotra said.
According to him, the overall effect of tariffs will be small, but there may be some possible effects in certain industries, such as jewelry and gems, clothing, and textiles.
US President Donald Trump levied a 25% tariff on Indian goods starting on August 7. Additionally, a 25% penalty was announced, which would go into effect on August 27 and raise the total tax to 50%.
In response to India’s ongoing purchases of Russian crude oil, the US defended its move. The oil purchase, according to the US, undermined US efforts to put pressure on Russia to end the Ukraine situation. The central government has denied US allegations, claiming that imports of Russian oil helped to stabilize the world’s energy markets.
Analysts believe that because of strong domestic demand, a 50% tax is unlikely to have a major effect on India’s GDP.
Pharmaceuticals, cellphones, and steel are now reasonably shielded due to exemptions, current tariffs, and strong domestic demand, but labor-intensive textiles and the gem and jewelry market are anticipated to experience a mild impact.